Best Emergency Loans for Bad Credit for December 2024

The Bottom Line

Upgrade is our choice for the best option for most people who have fair credit or who are applying with a co-applicant and need funds fast. The wide range of loan amounts and repayment terms means that most people can get what they need from the lender. Patelco Credit Union and Prosper offer similar options for folks applying with a co-borrower, but membership is required for the former, and the latter offers fewer repayment term options. 

People with poor credit or no credit history may have better luck getting individually approved with Upstart. And those seeking to put forth collateral may find that Universal Credit is the best fit for their needs. LendingClub is great for people who need fast cash or are looking to pay for medical expenses, but borrowers with poor credit will need to apply with a co-applicant.

What Is an Emergency Loan?

An emergency loan is a personal loan that provides a borrower with a lump sum of money that can be used for almost any purpose—including emergencies like unexpected medical bills and urgent home repairs.

Personal loans aren't your only option in an emergency. If you have bad credit, you may need to consider other types of emergency loans, such as payday loans, pawn loans, or car title loans (learn more about these below). Each of these options will cost significantly more than a traditional personal loan, yet these may be your only options if your credit is poor.

Why Get an Emergency Loan When You Have Bad Credit?

If you've got bad credit, this may be the worst time to get a personal loan, since your poor credit will limit your choices and cost you more money in fees and interest. That said, if you're in a tight spot, you may not have time to wait, and an emergency loan may be your best option. It can be cheaper than alternatives like a payday loan or credit card cash advance. And since an emergency loan is unsecured, it doesn't require you to put up collateral as you would with a car title loan or a pawn loan. Plus, in addition to helping you out of a jam, your loan, properly managed, can help improve your credit score in two ways:

• On-time payments will improve your payment history; they are the biggest component of your credit score, worth 35% of it.
• Adding an installment loan to your profile will improve your credit mix, which is worth about 10% of your credit score.

Best Uses for an Emergency Loan

Some lenders may have restrictions on how you can use the loan, such as for investing or gambling or to pay for college tuition and fees, but most situations that we would consider "emergencies" aren't among them. Because loans to borrowers with bad credit are expensive, you should carefully consider whether or not your situation is a true emergency. Situations that might qualify include:

• An emergency medical bill
• A home repair or replacement of an appliance
• Car repairs
• Replacement for lost income to cover monthly bills
• Funeral costs
  

In Investopedia's Personal Loan Borrowers Survey, when we asked current and potential borrowers what they planned to use their loan for, more borrowers said debt consolidation than for any other reason. The next most common uses were loans for home improvements, large purchases, and medical expenses.

How to Fix Your Bad Credit Score

You won't find "bad" credit as an official credit score rating, at least not in your FICO credit score. Instead, your bad credit may be listed as "fair" or "poor" (or just "no credit" if your credit history is thin).

There's no secret to improving your credit score—and there are no shortcuts either. The credit bureaus are transparent about what goes into a credit score. Once you understand those factors, you can create a plan and begin to repair your credit.

1. Review your credit history: Visit annualcreditreport.com and get copies of your credit history from each of the three bureaus. Review for errors, and then dispute them. Check your credit score with your bank or another lender or financial institution—many provide FICO or other scores as a free benefit.
2. Pay your bills on time: The biggest piece of the credit score pie is payment history, and simply making payments in full (and on time) will move your credit score higher.
3. Pay down debt: The next biggest piece of the pie is credit utilization. That's how much of your available credit you are using. Say you have a credit card with a $10,000 limit and a $5,000 balance on that card. This would result in a utilization of 50%. Reducing that percentage as much as possible will improve your utilization and your overall credit score.
4. Avoid hard inquiries: Applying for new loans will have a negative effect on your credit score, as lenders will review your credit file—a hard inquiry. This dings your credit score slightly since adding new debt to your finances makes you a riskier borrower.
5. Be patient and keep at it: Improving a bad credit score won't happen overnight. But it will happen if you stick with the plan. Track your progress with one of the many free credit score monitors available from credit card issuers, banks, and others.

How to Choose the Best Emergency Loan for Bad Credit

When choosing an emergency loan for bad credit, some factors to consider include how much the loan will cost, the repayment terms you can get (which will determine your monthly payment), and how quickly you can apply and get funded.

• How much the emergency loan will cost: The cost of an emergency loan is made up of the interest rate you’re charged and the fees you’ll pay to get the loan. Borrowers with better credit scores might be approved for loans without origination fees. A loan’s annual percentage rate (APR) represents the sum of these two costs as an annual percentage of the amount borrowed. You should always consider lenders offering the lowest APR.
• What repayment terms can you get on the loan: Before choosing a lender, ensure it offers a repayment timeline that fits your budget. Shorter repayment terms will result in larger payments because you’ll pay off the loan more quickly. This means you’ll also end up paying less interest over time. Look for a lender that offers the shortest repayment term you can comfortably afford.
• How quickly you can apply and get funded: It’s also important to evaluate how easy it is to apply for the loan and how quickly you’ll get funded. These two factors are often related since lenders that offer an easy online application process may also offer fast funding. Many of the best lenders offer approval in minutes and funding in as few as one to three business days (sometimes even the same day).

How to Apply for an Emergency Loan if You Have Bad Credit

Before applying for an emergency loan for bad credit, gather your personally identifiable information (e.g., Social Security number [SSN], date of birth, address), income information, and details about the funding you need (i.e., loan amount and purpose). This will make the application process easier, as lenders will require you to provide this information. 

1. Get pre-qualified: Submit a preliminary application with basic details to see if you qualify, which won’t affect your credit if the lender uses a soft credit check. The lender will tell you if you qualify and the rates and terms you might be able to receive. Read the terms and conditions carefully. Go through this process with at least three lenders so you can compare offers.
2. Submit a complete application: If the rates and terms are acceptable to you, you can proceed with the full application. At this point, the lender will perform a hard credit inquiry, which will affect your credit score. You may also be asked to provide additional documentation, like copies of pay stubs or bank statements.
3. Accept the terms and get funded: If you’re approved, review the final loan offer and decide if the actual terms are acceptable. The lender will send you the funds in the manner specified in your application—for instance, depositing the funds into your checking account or disbursing the funds directly to your other creditors if you're consolidating debt.
4. Make a plan to repay the loan: Finally, you’ll set up your account via an online portal or mobile app so you can manage your loan.
   

Alternatives to Emergency Loans for Bad Credit

An unsecured personal loan isn't your only option for an urgent loan, but you should carefully evaluate all of the following alternatives before choosing one.

• Credit card cash advance: Most credit cards allow you to withdraw cash—a cash advance. However, these loans can be expensive, with APRs as high as the card's default rate (usually around 30%). You'll also be charged a withdrawal fee of a few percentage points of the amount advanced, and interest will begin accruing immediately.
• Payday loan: A payday loan is an advance on your next paycheck. These short-term loans come with high interest rates and fees, resulting in APRs of 400% and more. Because of their expense, they can make it hard to break the cycle of debt.
• Payday Alternative Loan (PAL): Many credit unions offer PALs, loans of up to six months for relatively modest amounts—$1,000 or less. While APRs can be steep, they are capped at 28% by federal regulation.
• Cash app: Apps and services like Dave, Earnin, and the like offer short-term cash advances of small amounts ($20 to $500), for a fee. Most of these services charge a subscription and may have other requirements, such as opening a checking account, on top of the fees associated with the loan.
• Title loan: A title loan, or a car title loan, is a secured loan option backed by an asset you own, usually a car. Loan amounts are tied to the car's market value and are often capped at 50% of that value. Terms are short—30 to 180 days—and APRs are as high as 400%.
• Home equity loan: If you need a significant amount of money and your emergency can wait, you can tap into the equity you have in your home, if any. The process of getting a home equity loan or home equity line of credit (HELOC) can take 30 to 60 days or more, so this isn't the solution if you're in a hurry. Assuming you can qualify, rates and fees will be considerably cheaper than other alternatives here.
• 401(k) loan: If you have a 401(k) through your employer, you may be able to borrow from it. Loans are capped at half the account's value or $50,000, whichever is lower. Fund access is fast, typically seven to 10 days. You'll have to repay the loan, with interest, within five years. The interest is paid into your account, and in effect, it's like recouping some of the earnings loss you experienced due to the withdrawal of funds.

How to Build an Emergency Fund

If emergencies are unavoidable, borrowing to pay for one doesn't have to be. All you need is a dedicated savings account—an emergency fund—to help see you through. But how do you build one?

1. Set a savings goal: How much should you save? You might aim for several months' worth of living expenses (just the basics) or focus on the types of emergency spending you've experienced (car repairs or a vet bill, for example) and set an amount that would cover that as your goal.
2. Set up consistent savings: Find a system that works for you that makes saving automatic and consistent. One way is to set up automatic fund transfers to a dedicated savings account. The transfers don't need to be large—consistency is the key.
3. Set aside windfalls: If you get a bonus at work, a tax rebate, or some other financial good luck, resist the urge to spend all of it. Send some to your emergency savings account to boost your financial cushion.
4. Decide where to save it: Banks and credit unions are the obvious choices. Look for high-yield savings accounts that will help your money grow faster.
   

Compare the Costs: Emergency Loan vs. Emergency Fund

Let's compare what it costs to build a $3,500 emergency fund versus the cost to repay a $3,500 emergency loan. We'll open a high-yield savings account for the emergency fund that earns 5.00%. We'll assume an interest rate of 30% for the emergency loan, representing "bad" credit interest rate offers you might receive. Also, let's assume a four-year repayment term and use a loan calculator to find a monthly payment: $113.24. That results in $2,549 in interest expense for a total repayment of $6,049.

Meanwhile, if instead of finding room in your budget to repay a loan, you find room to invest in a savings account, and you direct $113.24 to your emergency fund savings account, earning 5% interest. After two years and five months, your account will have grown to $3,625, with $229 of that interest you earned on $3,284 in deposits. (You can calculate your own savings goals here.)

While opening a savings account and building an emergency fund can't cover your emergency expenses today, it will help you out of a jam in two and a half years and cost you thousands of dollars less in loan fees.

Why You Should Trust Us

Investopedia researchers collected and analyzed dozens of key data points from 59 lenders to identify the most important factors for readers choosing the right lender to suit their needs. We used this data to review each company for interest rates, fees, repayment terms, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best emergency loans for bad credit since 2020.

How We Picked the Best Emergency Loans for Bad Credit

Investopedia’s list of the best personal loans is based on comprehensive research of 59 lenders. 

To evaluate and rank personal loan providers, we collected and scored over 2,600 data points from 59 lenders, including traditional banks, credit unions, fintechs, and finance companies. We researched and evaluated 45 criteria such as APRs, loan amounts and terms, fees, customer experience, and more. Research and data collection occurred from July 23 to Oct. 18, 2024. 

We organized the 45 criteria into four categories and weighted 26 (involving more than 1500 data points), using the others for background and editorial richness. We then scored and weighted each criterion to develop our overall star rating for each lender. The categories and their weights for this project are:

• Borrowing Requirements: 24.00%
• Lender Features: 24.00%
• Loan Costs: 30.00%
• Loan Terms: 22.00% 

Learn more about how we evaluated personal loans in our complete methodology.

Learn More About Emergency Loans

• Instant Personal Loans
• What Is a Payday Loan?
• What Is Emergency Credit?
• How to Get an Emergency Loan
• How to Get an Emergency Student Loan
• How to Apply for a Personal Loan
• How to Use a Personal Loan
• Personal Loans vs. Credit Cards
• Payday Loans vs. Personal Loans
• Alternatives to Personal Loans
• What Are the Easiest Personal Loans to Get Approved For?
• What Is a Personal Loan?
• Where to Get a Personal Loan
• Best Personal Loans
• Best Personal Loans for Bad Credit
• Best Fast Personal Loans